Capital gains higher rate pension relief

Geography_rox

Hi,

this may be a very basic question, but I was wondering, if I am a 40% income tax payer, and therefore a 20% CGT payer, if I sell a load of my crypto at a sizeable profit and put a chunk into a private pension, can I claim 40% relief even though I only paid 20% tax? Presumably I can only put in as much as my salary is above the 40% threshold? (Eg If I earn 80k and sold crypto worth around 42k in profit, could I put the 30k post CGT allowance of the gains into a pension pot and claim the 40% tax relief?)

thanks!

Linton

For your circumstances the higher rate CGT and your pension contribution/tax are completely separate.  Yes you can pay £30K into your pension but there is no link between that £30K and the £30K after CGT tax allowance. Your pension payment could have been anything within the  earnings and annual allowance limits and could have come from anywhere.  You are going to have to pay the 20% tax on £30K Capital Gains anyway. (Well not quite true, you could avoid the higher rate by putting a lot more into your pension)

I will assume that you pay the £30K into a private pension, say a SIPP.    HMRC would pay the basic rate tax refund of £7500 into your SIPP making a gross contribution of £37500.  You, rather than your pension, will get paid the Higher Rate Relief at the end of the Tax Year since its value depends on your overall tax situation.  Only that part of the £37500 contribution that falls within the Higher Rate band will receive higher rate relief.

Note that the earnings and annual tax allowance limits on your pension contributions remain - Capital Gains are not "earnings".  But whether you are a 20% or 40% or even a 0% tax payer has no bearing on how much you can put into your pension.  You will always at least get the 20% basic tax relief.

Geography_rox

Thanks, that's a very clear explanation!